Until now, an e-resident entrepreneur had to come to Estonia to open a bank account. But the amendment to the country's Money Laundering and Terrorist Financing Prevention Act will allow banks to replace the requirement of an in-person meeting with a three-stage personal identification process.
Banks will use a software platform to interview the individual remotely, and that interview will then be saved. On top of that, banks will also use the document issued in Estonia for verifying digital identities, a personal identification document issued by a foreign state, and a database of personal identification documents.
Although that process means e-residents will now be able to open a bank account and start a business without ever coming to Estonia, the country's e-residency program director Kaspar Korjus says security and transparency remain top priorities.
Applicants for e-residency are already fingerprinted and background-checked by the Estonian state. Once applicants for e-residency are approved, they're issued with an electronic ID card which, in combination with a four-digit PIN, can be used for secure digital identification.
After an e-resident has successfully opened a bank account, the bank still has to take further measures to prevent money laundering.
For example, the first payment to the opened bank account needs to be made from a credit institution or the branch of a foreign credit institution registered in the Estonian commercial register.
Alternatively, the payment can come from a credit institution registered or with its place of business in a contracting state of the European Economic Area, or in a country where requirements equal to those provided for in the act are in force.
Naturally, the bank will retain the right to ask individuals to provide ID if they are applying in person at a bank branch. The service is meant for any holder of the Estonian ID, digi-ID, or e-resident card.
In Korjus' opinion, the new legislation is only not a big milestone for e-residency but also highlights that transparent and secure banking are possible, while the Panama scandal showed the world that closed and hidden systems are no longer sustainable.
"The world has developed to the point where systems like Swiss banking and Panama schemes are inadmissible, whereas transparent platforms like e-residency are gaining more and more popularity, because they're open, all data is accessible, all the transactions are digital and traceable. Every country that wants to get their citizens' taxation information can get it directly," he says.
"We're the exact opposite of Panama. No criminal or person who wants to hide something is going to apply for e-residency. The application process starts with the applicant giving his or her fingerprint to the state of Estonia. The digital identity means all your transactions will be digitally saved. This is clearly not a solution for hiding your money, financial transactions, or any other activities."
Estonia's project has sparked a lot of interest among companies promoting secure data services. In addition to the country's cooperation with US stockmarket firm Nasdaq to enable blockchain-based voting in shareholder meetings, venture capitalist Tim Draper recently helped create a partnership between e-residency and a blockchain startup Stampery, in which he had invested last year.
As a result, e-resident cardholders can now authenticate and certify business and personal files via Stampery's blockchain certification interface, based on the distributed public ledger that underpins Bitcoin transactions.
Stampery CEO Daniele Levi, who is also an e-resident, reckons Estonia is the most innovative country in the world.
"We're big fans of what they're doing. As soon as we heard about it, we wanted to co-operate," he says.
"Blockchain technology provides a mathematical truth that can't be manipulated. It can have a really big impact on countries that have to interoperate with each other, like those in the European community."
However, Estonia's initiative now also has some competition from the private sector. At the start of the year, US start-up Stripe announced a new service called Atlas, which allows entrepreneurs to incorporate a US company, set up a US bank account, and start accepting payments with Stripe.
According to Estonia's e-residency program director Korjus, it is a sign that Estonia is doing the right things and moving in the right direction.
"Actually, we're happy that Stripe came out with this service, because it shows that other countries are also moving towards providing their business environment to more people than their own citizens and that they too want to do this transparently. Stripe is a payment service provider and if it ever wants to come to the EU market, then Estonia could be the best partner to provide EU business environment," he said.
Korjus believes we are only in the first stages of these innovative developments.
"Stripe Atlas is for now an invitation-only service, and we also have to wait about a half a year before we can say people don't even have to travel to EU to get its services working."
As of beginning of May, over 10,000 people had applied for e-residency. Applications have arrived from 127 countries, with most coming from Finland, Russia, the US, Ukraine, Italy, Germany, UK, Latvia, India, and the Netherlands.
Korjus says the number of people applying for e-residency during the beta phase has already exceeded the project's initial plans.
"I believe that after the adoption of the changes we'll truly be able to unleash the world's entrepreneurial potential," he adds.